Are US Treasuries becoming a financial chokepoint?

Summary

US Treasuries, traditionally a safe-haven asset, are potentially becoming a source of financial risk, which could have significant implications for market stability and asset prices. This shift may lead to a reevaluation of risk across various asset classes. The article suggests a possible turning point in the perception of US Treasuries, from a haven to a risk factor.

Market Context

If US Treasuries are viewed as a source of risk, this could lead to increased volatility in bond markets, potentially spilling over into equities and other asset classes, such as gold (XAU) or cryptocurrencies (BTC), as investors seek alternative safe-haven assets. This scenario could result in a decrease in the value of US Treasury bonds and an increase in their yields.

Key Drivers

• Perception shift of US Treasuries from safe-haven to risk asset
• Potential increase in bond market volatility

Risks

• Increased volatility in bond markets could lead to a flight to quality, impacting equity markets (e.g., SPY) and other risk assets

Time Horizon

Medium Term